In today’s increasingly complex financial environment, recognising illegal investments has become more difficult.
The Securities and Exchange Commission (SEC) in Nigeria plays a vital role in overseeing and developing the capital market, with a strong focus on safeguarding investors from fraudulent investment schemes.
To support this effort, the SEC regularly issues alerts on unregistered investment operators and offers guidance to help the public identify legitimate investment opportunities.
Recently, the Securities and Exchange Commission (SEC) uncovered suspected illegal investment platforms operating under the names TOFRO.COM (Tofro), CBEX (Crypto Bridge Exchange), and Property World Africa Network (PWAN).
The Commission has urged Nigerians to report any suspected illegal investment activities to the SEC to enable swift investigation and appropriate enforcement actions.
The commission specifically cautioned against fraudulent investment opportunities that promise guaranteed or unusually high returns with little or no risk. It noted that, such schemes, often disguised under the guise of cryptocurrency investments, forex trading, or blockchain-based platforms, frequently operate without registration or approval from the SEC.
The SEC reiterated that many of these schemes exploit digital asset trends to appear legitimate and attract unsuspecting investors. It stated that such unregistered platforms are in violation of the Investments and Securities Act, 2025, which criminalises the operation and promotion of prohibited or unregistered investment schemes.
According to the SEC, any individual or company found guilty under Section 196(3) of the Act risks a penalty of not less than N20million or imprisonment for a term of 10 years, or both.
The commission encouraged potential investors to verify the registration status of companies or promoters through its official website before committing funds.
Also, in line with its commitment to sanitising the financial space of the nation and offer the investing public adequate and reliable information on the activities of illegal ponzi scheme operators across the country, the Economic and Financial Crimes Commission (EFCC) recently alerted Nigerians on the operations of 58 companies posturing as investing entities and defrauding innocent Nigerians of their hard-earned money.
The companies are neither registered with the Central Bank of Nigeria (CBN) nor Security Exchange Commission (SEC).
Meanwhile, capital market operators strongly condemn illegal investment schemes like Ponzi and pyramid schemes. They have actively supported legislative efforts to prohibit such activities and protect investors.
The managing director of HighCap Securities, David Adonri shared some important advice for anyone thinking about investing in financial assets. He emphasised that, “when people consider moving their money into these investments, they should first be wary of claims about returns. If someone promises guaranteed returns that are significantly higher than the current rate for Treasury bills—specifically, rates around 20 per cent right now; it is likely too good to be true.”
He explained that, “normally, Treasury bill rates would sit between five and seven per cent, but due to economic challenges, they are currently inflated. Any investment offering returns much higher than this should raise red flags.”
Adonri pointed out that, many Ponzi schemes promise unrealistic returns, sometimes exceeding 100 per cent in a short time. He also recommended that potential investors check if the investment scheme is registered with the Securities and Exchange Commission in Nigeria, saying that this information can easily be verified by visiting the SEC’s website.
Adonri expressed frustration over how many people still fall for these schemes, despite ongoing warnings from regulators and the financial media.
He suggested that not only the promoters of these fraudulent schemes should face consequences, but the victims themselves should also take responsibility for their choices, as many ignore the risks involved.
Red Flags To Watch Out For
Unrealistic Returns: If an investment promises unusually high returns with little or no risk, it is likely a red flag. Legitimate investments typically come with some level of risk.
Lack Of Transparency: Be cautious of investments that lack clear documentation or have complex structures that are difficult to understand.
Unregistered Investments: Verify if the investment is registered with relevant regulatory bodies. Unregistered investments can be a significant warning sign.
Tips For Investors
Conduct Thorough Research: Research the investment thoroughly and verify information with regulatory bodies.
Seek Professional Advice: Consult with financial experts or regulatory bodies if you are unsure about an investment.
Stay Informed: Stay up-to-date with market trends and regulatory changes to make informed investment decisions.
Identifying illegal investments requires a combination of knowledge, vigilance, and caution. By being aware of the red flags and taking steps to educate yourself, you can make informed investment decisions and avoid potential pitfalls.
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